Introduction
Many salaried employees in India pay rent but do not receive House Rent Allowance (HRA) from their employer. In such cases, they often miss out on valuable tax benefits.
But did you know that even if you don’t receive HRA, you can still claim a tax deduction on rent paid under Section 80GG of the Income Tax Act, 1961?
This article explains who can claim rent deductions under Section 80GG, how much deduction can be claimed, the eligibility conditions, and the step-by-step process to file your claim.
What is Section 80GG?
Section 80GG allows salaried employees and self-employed individuals to claim a tax deduction on rent paid for accommodation, provided they do not receive HRA from their employer.
This section is particularly beneficial for:
Employees who don’t get HRA as part of their salary structure.
Self-employed individuals paying rent.
Professionals and freelancers who don’t have employer benefits but live in rented accommodation.
Who Cannot Claim 80GG?
Salaried employees already receiving HRA from their employer.
Individuals who own a house in the same city where they work.
If the spouse or minor child owns a house in the same location.
How Much Tax Deduction Can You Claim Under 80GG?
The maximum deduction allowed under Section 80GG is the lowest of the following three amounts:
₹5,000 per month (₹60,000 per year).
25% of total adjusted gross income.
Actual Rent Paid – 10% of Total Income.
Example Calculation
Let’s say:
- Your annual taxable income = ₹8,00,000
- Your annual rent paid = ₹1,80,000 (₹15,000 per month)
- 10% of income = ₹80,000
Now, applying the Section 80GG formula:
- Rent Paid – 10% of Income → ₹1,80,000 – ₹80,000 = ₹1,00,000
- 25% of Income → ₹2,00,000
- Maximum Limit → ₹60,000
Final Deduction Allowed: ₹60,000 (since it’s the lowest amount).
How to Claim Rent Deduction Under Section 80GG?
Step 1: Fill Form 10BA
Before claiming the deduction, you must submit Form 10BA on the Income Tax e-filing portal. This form is a declaration that you are not claiming HRA and are paying rent for accommodation.
How to Fill Form 10BA?
- Log in to the Income Tax e-Filing Portal → www.incometax.gov.in
- Navigate to e-File → Income Tax Forms → Form 10BA.
- Fill in details like:
- Name & PAN
- Rental Address
- Landlord’s Name & PAN (if rent exceeds ₹1 lakh per year)
- Total rent paid
- Declaration that you don’t own a house
- Submit the form and save the acknowledgment for future reference.
Step 2: Declare Rent in Your ITR
Once Form 10BA is submitted, claim the Section 80GG deduction while filing your Income Tax Return (ITR):
For Salaried Employees → File ITR-1
For Self-Employed Individuals → File ITR-3
Under the “Deductions” section, enter the 80GG amount calculated based on the lowest of the three conditions discussed earlier.
Important: If your annual rent exceeds ₹1,00,000, you must provide your landlord’s PAN while claiming this deduction.
Example of Section 80GG Claim in ITR
Let’s assume:
Your salary (without HRA) is ₹7,50,000 per year.
You pay rent of ₹12,000 per month = ₹1,44,000 per year.
Using the formula:
- Rent Paid – 10% of Income → ₹1,44,000 – ₹75,000 = ₹69,000
- 25% of Income → ₹1,87,500
- Maximum limit per year → ₹60,000
Final deduction under Section 80GG = ₹60,000
This deduction will reduce your taxable income from ₹7,50,000 to ₹6,90,000, lowering your tax liability.
Frequently Asked Questions (FAQs) on Section 80GG
1. Can I claim 80GG if I am a freelancer or self-employed?
Yes! Self-employed individuals can claim rent deduction under Section 80GG as long as they meet the eligibility criteria.
2. I have home loan EMIs but still live in a rented house. Can I claim 80GG?
Yes, if your owned house is in another city and you are paying rent where you work, you can still claim 80GG deduction.
3. Can I claim 80GG for PG accommodation or shared rent?
Yes, but you need rent receipts from the PG owner/landlord as proof of payment.
4. I forgot to submit Form 10BA. Can I still claim 80GG?
No, Form 10BA is mandatory. Without it, your claim can be denied by the Income Tax Department.
5. Is there any deadline to claim Section 80GG?
Yes, you must claim it before filing your ITR for the respective financial year.
Mistakes to Avoid While Claiming 80GG
1. Not submitting Form 10BA – This is mandatory to claim the deduction.
2. Not keeping rent receipts – Always keep proof of rent paid in case of tax scrutiny.
3. Not providing landlord’s PAN if rent exceeds ₹1 lakh – This can lead to claim rejection.
4. Claiming both HRA and 80GG – You can’t claim both! If your employer provides HRA, 80GG is not applicable.
Conclusion
For salaried employees who do not receive HRA, Section 80GG offers a great way to save tax on rent paid. However, to maximize benefits and avoid mistakes, ensure that you:
Meet the eligibility criteria (no HRA, no owned house in the same city).
Fill and submit Form 10BA before ITR filing.
Keep all rent receipts and landlord details for future reference.
By following these steps, you can legally reduce your taxable income and save more on taxes!
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